JEFF PRESTRIDGE: Future mortgage rates is acid test for Barclays boss

Increased competition in financial services is always good for consumers. We’ve seen it lately (and about time too) in the current account market with the arrival of the likes of Metro Bank and Marks & Spencer, which are offering fed-up customers of mainstream banks a good current account alternative.

And greater competition in the mortgage market is also providing greater choice – and let’s be honest, with the reticence of some High Street banks to lend, we don’t half need it. Even better, some of these relatively new lenders are prepared to offer some of the best rates around.

Tesco, for example, has just launched a couple of fixed 60 per cent loan-to-value home loans that leading mortgage experts have welcomed.

Will he pass the acid test? New Barclays chief executive Antony Jenkins

The rates on the new two and five-year fixed-rate loans are 2.64 per cent and 3.19 per cent respectively. Although they come with a £1,295 fee, David Hollingworth of broker London & Country says the deals are ‘competitive’. He says: ‘These are not the first positive rate changes that Tesco has made since launching into the mortgage market earlier this year. They suggest a clear intent to maintain a competitive position in what is becoming a fast-changing market.’

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Handelsbanken, a Swedish bank that has 137 UK branches and is winning a growing reputation for listening to its customers, has also just bucked the trend by reducing its standard variable rate (SVR) loan rate – from 4.75 per cent to 4.5 per cent.

Although the rate is not as competitive as, say, Nationwide’s, it’s nice to see a lender cutting the SVR rather than raising it.

Earlier this month, Santander increased its SVR from 4.24 per cent to 4.74 per cent, hitting some 400,000 homeowners.

The bank justifies the increase by saying the cost of providing mortgages has risen over the past three years. It also says the increase reflected the fact the cost of running a bank in Britain had risen ‘dramatically’ as a result of regulatory demands, forcing it to hold more cash and build a bigger capital buffer.

In contrast, Handelsbanken says its rate reduction reflects its ‘reputation for financial strength and prudence’.

With Tesco and Handelsbanken doing their bit to gee up the mortgage market – and Nationwide and HSBC also improving their mortgage ranges – it is a shame ING Direct is about to be swallowed up by Barclays. Dutch-owned ING has £5.6 billion of mortgages and at times has offered some competitive loan deals.

What will be interesting to see is how Barclays treats those ING borrowers who currently sit on its SVR of 3.99 per cent – a rate that was increased in August from 3.5 per cent but is still at the lower end of the SVR scale.

Barclays’ SVR is 4.99 per cent. How will its new boss Antony Jenkins align the rates? Move ING borrowers on to 4.99 per cent, or reduce Barclays’ rate to 3.99 per cent? It will be the first test of whether Jenkins is the customer-focused boss he purports to be.

Pension charges

High pension charges were a topic of great discussion among delegates attending some fringe meetings at the Conservative Party conference in Birmingham last week.

But one pension issue that barely got a hearing was that of the ridiculous nanny-state rules that currently govern the amount of income people can take from a pension set up under ‘income drawdown’ rules.

Income drawdown is designed to allow people with sizeable pension pots (£100,000 plus) to take an income without having to buy a miserly annuity, which they are then locked into for life.

However, the Government, it seems, has become increasingly nervous over the freedom these arrangements give.

In particular, it has become agitated that maybe some holders will deplete their pensions by taking too much income, with the result that they will come cap in hand later in retirement for State handouts.

The result is stricter limits on the amount of income that can now be taken. This in turn has caused acute pain for many in income drawdown, who have suddenly seen the income they rely on to maintain their standard of living savaged.

Ros Altmann, director general of Saga, a provider of financial products for the over-50s, says she has been contacted by a number of people alarmed by these changes.

The Government should unwind these restrictions. People in income drawdown are in such arrangements because they were prudent enough to save for retirement. The last thing they are now going to do is squander their retirement fund by going on an income spree.